Balancing a part-time job offers remarkable flexibility, but the limited benefits can be frustrating. Fortunately, a new regulation is paving the way for countless part-time employees to begin building their retirement savings sooner through employer-sponsored plans. This regulation—part of the Secure Act 2.0 enacted in 2022—shortens the waiting time for part-time employees to enroll in their workplace 401(k) or 403(b) plans. Here’s what to know in order to benefit from this change and boost your savings this year.

Enhancing Retirement Savings for Part-Time Employees

According to the new guidelines, part-time workers can now qualify for their employer’s retirement plan after just two years of service, provided they log at least 500 hours in each year. This is a reduction from the previous three-year condition, significantly facilitating part-time employees’ journey toward saving for retirement through their employer’s offerings.

To put this into perspective, 500 hours annually corresponds to about 10 hours weekly, allowing even those with limited schedules to gain access to these vital benefits more promptly. This new regulation is advantageous for a diverse range of individuals:

• New employees maintaining steady part-time hours can start saving a full year sooner than under the earlier rules.

• Individuals managing multiple part-time roles can now access benefits from their long-term employers more quickly.

• Parents or caregivers working reduced hours can initiate their retirement savings earlier.

• Students who hold part-time jobs while attending school can embark on their retirement savings journey at an earlier point in their careers.

Understanding the Details

It’s important to clarify: freelancers are considered self-employed (and qualify for distinct retirement plans), whereas this rule is intended for long-term part-time employees who are still part of the organization and eligible for employee benefits.

Furthermore, the new provision comes with several crucial stipulations:

• This rule is applicable to most 401(k) plans and select 403(b) plans.

• Collectively bargained agreements are excluded from these requirements.

• Service hours accrued prior to 2021 do not count toward the eligibility criteria.

• Employers are still obliged to offer plan participation to those accumulating 1,000 hours in a calendar year.

Making the Most of Your Retirement Savings

For part-time employees now eligible for retirement plans, consider these steps to enhance savings:

1. Check your employer’s matching program, if available, and aim to contribute enough to receive the full match.

2. Evaluate your potential contributions from each paycheck.

3. Explore automatic contribution increases to gradually raise your savings rate.

4. Investigate the investment options within your plan and select a diverse portfolio that aligns with your retirement timeline.

5. Be aware of any vesting schedules associated with employer contributions.